Information Technology and Competitiveness: The Mexico`s SMEs
Transcription
Information Technology and Competitiveness: The Mexico`s SMEs
Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 Information Technology and Competitiveness: The Mexico’s SMEs Context Gonzalo Maldonado Guzman, Faculty of Management and Economics Science, Autonomous University of Aguascalientes, Mexico. E-mail: gmaldona@correo.uaa.mx Gabriela Citlalli Lopez Torres, Faculty of Management and Economics Science, Autonomous University of Aguascalientes, Mexico. E-mail: gclopto@gmail.com Maria del Carmen Martinez Serna, Faculty of Management and Economics Science, Autonomous University of Aguascalientes, Mexico. E-mail: mcmartin@correo.uaa.mx Salomon Montejano Garcia, Faculty of Management and Economics Science, Autonomous University of Aguascalientes, Mexico. E-mail: smontej@correo.uaa.mx ______________________________________________________________________________ Abstract In order to survive a highly competitive market, small and medium-sized enterprises (SMEs) must use information technologies (IT) more efficiently than large companies, since this will allow them to be more competitive. However, increasing competitiveness depends on the skills the firms possess, in order to implement the IT to their organizational strategy as well as how efficiently they’re managed. In this study, we analysed the influence of IT on competitiveness skills of 400 SMEs from the state of Aguascalientes, Mexico. The results show a positive influence on both global competitiveness and each one of the three discussed factors, which is why it can be inferred that the usage of IT at the core of SMEs may constitute a competitive advantage. ______________________________________________________________________________ Key words: Information Technology, Competitiveness, SMEs JEL Classification: C 19, G13, G 14 1 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 1. Introduction In a highly changing business environment, as prevails in most countries, all organizations, aside from sector or size; seek to survive (winter et al., 2009). For that, firm’s need to design and implement new strategies, and IT is at its peak (Reddy, 2006). However, the bigger firms are the ones using these strategies since they have better resources (Wainwright et al., 2005), and within SMEs, a series of barriers have been identified, preventing them from adopting IT as an organizational strategy (Parke & Castleman, 2007). In this context, Grosh and Somolekae (1996) identified a series of barriers that prevent SMEs from adopting IT and from growing. Among those barriers, they found the limited access to capital, manager’s educational level, and financial and legal barriers. Also, Duncombe and Heeks (2003), consider that IT may improve information capacity and business knowledge, which are essential for social and organizational development. However, these authors also think that SMEs have non-reliable information and networks of low quality, which makes it hard to generate and diffuse relevant information. On the other hand, Piscitello and Sgobbi (2004) consider that the biggest barrier when adopting IT is not the firm’s size, but knowing the processes to implement them within the organization, and Internet access. Also, these researchers concluded that SMEs need to make major changes in order to implement IT; plus, these changes must improve the business model so that using IT will improve the competitiveness rate. Hence, IT represents an elemental condition to reduce costs and increase organizational benefits (Duncombe & Heeks, 2003; Southwood, 2004; Matthews, 2007). Even though SMEs are quite important to any country’s economy, especially developing countries, there are very few studies published on specialized journals, analysing the importance of IT for SMEs’ essential aspects (Bharati & Chaudhury, 2009). As evidence of the above mentioned, in the last six years (Street & Meister, 2004), only one article has been published among the United States’ biggest specialized magazines: MISQ, ISR, and JMIS. This happens even when SMEs are very important to the U.S. economy. In this context, is necessary that researchers, academics, and professionals, work harder on studies analysing the relationship between IT and SMEs’ competitiveness in developing countries (Bharati & Chaudhury, 2009). This is the reason why, following Bharati and Chaudhury’s (2009) recommendations, the important contribution of this paper is the presentation of an analysis’s results on the influence of IT on a developing country’s SMEs’ competitiveness, through the usage of structural equations as the methodology. 2 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 2. Literature Review The relationship between IT and competitive advantages was first analysed by McFarlan and McKenney (1983). They suggested that through IT use, firms would achieve major impacts on their internal development, which can be considered as an alternative to improve their competitiveness. As such, IT might add a certain economic value to an enterprise by means of cost reduction and the differentiation of their products (McFarlan, 1984; Bakos & Treacy, 1986; Wiseman, 1988), which may provide an organizational competitive advantage at a certain point (Porter & Millar, 1985). Given that the market changes so rapidly, just like consumers’ expectations and technology, a company’s newly acquired competitive advantages have a very short life span (Qureshi et al., 2008). Therefore, Mata et al. (1995) concluded that IT not only brings along competitive advantages, but can also maintain and, in certain cases, increase the advantages. Also, these authors emphasised that resources and firm-based capacities provide a set of key competencies (Clemons, 1991; Barney, 1991), which can substantially improve cost reduction and product differentiation strategies. This will eventually create organizational value and increase and sustain a company’s competitive advantages. In this sense, Mata et al. (1995) also used the resource’s model based on the perspective of the firm, in order to explain competitive advantages maintenance, from two notions. The first one regards the heterogeneity of the resources that companies use to compete with each other, which vary according to their resources and capacities. The second one concept regards resources that might make a difference among the enterprises competing with each other. Hence, authors concluded that this model may be applied in order to attain a better access to capital for all ITrelated purposes (McFarlan, 1984), such as technical issues (Copeland & McKenney, 1988) and IT skills (Capon & Glazer, 1987), which can be understood as maintaining organizational competitive advantages. There is empirical evidence suggesting that the use of IT plays a very important role for SMEs’ development and growth (Sullivan, 1985; Raymond et al., 2005; Qiang et al., 2006; Matthews, 2007). This indicates that when SMEs adopt IT, the competitiveness rate increases by increasing productivity and sales, as well as access to new markets and more firm’s efficiency (Qureshi, 2005; Matthews, 2007). Likewise, Duncombe and Heeks (2003) concluded that IT might serve as an intermediary between market information needs and clients and suppliers, which might substantially improve an organization’s functioning. 3 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 On one hand, IT usage requires a series of changes in developed and developing countries in order to obtain the expected results (Honig, 1998; Hyman & Dearden, 1998; Lichtenstein & Lyons, 2001; Sanders, 2002; Schreiner & Woller, 2003; Piscitello & Sgobbi, 2004). Particularly, the most important change to be done, especially in developing countries such as Mexico, is to improve Internet access in SMEs, in order to face the changes and globalization of market (Piscitello & Sgobbi, 2004). And even doing the above mentioned, SMEs generally have trouble adopting IT given the greater competitive pressure they have, and the fact that they have not really understood its benefits IT brings to a firm (Riemenschneider et al., 2003). Aside from facilitating competitiveness rate improvement, IT is directly related to other benefits for the organization, such as costs reduction, potential market analysis, and searching for new business opportunity (Grandon & Pearson, 2004; OECD, 2004; Beck et al., 2005; Fink & Disterer, 2006). On the other hand, SMEs additionally require major changes in order to diagnose and intervene through IT processes (Wolcott et al., 2007; Qureshi et al., 2008); this means that in order to acquire or improve competitive advantages through IT adoptions, organizations must perform changes in two fields. First, basic operations support must be improved, as well as other processes, like marketing activities (Blili & Raymond, 1993; Levy & Powell, 1998; Foong, 1999; Poon & Swatman, 1999). Second, IT must be used to improve organization-client relationships given that SMEs regularly have influence on consumer’s likes and needs (Qureshi et al., 2008). Also, most SMEs depend on a limited number of clients that purchase considerable amounts of goods and services; therefore, clients exercise a very strong influence on goods’ prices (Reid & Jacobsen, 1988). Thus, in order to improve organization-client relationships, SMEs must rapidly respond to changes required by their clients. Levy et al. (2001) designed an analytical model in which these two key elements for IT adoption are incorporated; they called it Domain-focused model. This model examines the potential of SMEs to create value through their capabilities, investment in IT and market strategies. Likewise, this model provides four different results, product of incorporating IT, costs reduction and client domain. First, we have the efficiency quadrant, which considers that SMEs can exploit their IT as a simple text processor or as an accounting process (Naylor & Williams, 1994). The second quadrant is the coordination, which regards SMEs’ needs to increase their market participation and increasing the number of clients. The third quadrant is cooperation and it is related to SMEs’ requirements to implement IT within their processes, so that it will improve 4 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 business relationships with their customers and, at the same time, increase significantly the number of clients and consumers via this improvement. Lastly, innovation is the fourth quadrant which consists of all of SMEs’ requirements to adopt systems of information and implementing IT that will help them obtain greater competitive advantages. In the second phase, Levy et al. (2002) applied their model in 43 other SMEs in order to figure out how these companies could increase their competitiveness by adopting IT. The resulting data demonstrated that those SMEs that implemented IT along with costs reduction and improved company-client relationships generated unique consequences that improved their position and competitive advantages. These results give us empirical evidence of the existing relationship between IT and competitiveness rate; they are also a great indicator of the importance and effectiveness of both the resource-based model and the domain-based model (Qureshi et al., 2008). There are also several other studies that show the tight relationship between IT and competitiveness, as is the case of Lefebvre and Lefebvre’s (1993) study, which demonstrated the close relationship between IT, innovation and competitiveness within SMEs. Levy and Powell (1998), Quale (2002), Quale and Christiansen (2004), and Beckinsale et al. (2006) who identified the fact that using the Internet, reduces operational costs, improves customer service significantly, provide market skills, increases relationships with partners, and brings about more competitive advantages. Tse and Soufani (2003) considered that IT substantially improves customer service and response time, reduces management costs, and improves competitive advantages, while Mehrtens et al. (2001) concluded that IT provides better business relationships and marketing skills, meaning more competitive advantages. Likewise, Levy et al. (2005) also concluded that adopting IT provides a direct strategy that allows SMEs to create new products and markets and so improving their competitive advantages. Finally, there is a wide consensus among several researchers who think that adopting IT improves internal and external exchange of information (Sanders & Premus, 2005), which generates a positive impact on an organization’s performance (Bharadwaj, 2000; Kearns & Lederer, 2003), generates more competitiveness (Ives & Jarvenpaa, 1991; Earl, 1993; Kathuria et al., 1999), and provides a superior competitive capacity (Kathuria et al., 1999). Now we can present a hypothesis regarding the existing relationship between IT and the competitiveness rate. H1: Higher adoption of IT, higher level of competitiveness 5 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 3. Methodology In order to respond to the upper mentioned hypothesis, an empirical study was carried out on Aguascalientes’s (Mexico) SMEs, based on 2010’s Business Directory from Mexico’s Business System of Information, corresponding to the Aguascalientes state, which had 7,361 registered companies in June. For this study, only those companies with 5 to 250 workers were taken into account, which reduced the sample population to 1,322 firms. Also, the sample was selected through a random sampling of 400 organizations with an error margin of ± 4.5% and 95% of reliability, applying surveys from January to March 2011. Lastly, the survey was applied to managers or owners through personal interview on the 400 selected firms; out of those, 54 were eliminated because they did not meet the minimum quality requirements (lack of information, survey loss, etc.) obtaining 346 valid surveys with response rate of 87%. The definitive survey obtained information about IT use and the competitiveness rate obtained during the last two years. Regarding IT measurement, literature presents different ways and groups of items for its measurement. However, it is important to take into account its definition before its measurement, since item usage depends on it (Sanders & Premus, 2005). As such, for this study was considered the definition of TI provided by Grover and Malhotra (1999) who defined IT as “using technology to acquire process and transmit information to make decision taking more efficient”. So, for this paper’s IT measurement, a 7-item scale was used. It was adapted from Kent and Mentzer (2003), and Sanders and Premus (2005). It was measured with a 5-point Likert scale with 1= completely disagree and 5= completely agree as limits. Also, for measuring competitiveness in this study, the 3 factors proposed by Buckley et al. (1988) were used: financial performance, cost reduction and use of technology, and a 6-item Likert scale was used on each factor with 1= completely disagree and 5= completely agree as limits. As a previous step to result analysis, a validity and reliability analysis was carried out on IT and competitiveness. For this purpose, the Confirmatory Factorial Analysis (CFA) and the maximum Likelihood methods were used (Bentler, 2005; Brown, 2006; Byrne, 2006). Likewise ITs and competitiveness’s scale’s reliability was tested using Cronbach’s alpha coefficient and the Composite Reliability Index (CRI) (Bagozzi & Yi, 1988), obtaining values superior to 0.70 for both coefficients, which indicates that there is enough reliability and justifies the reliability within each scale (Nunally & Bernstein, 1994; Hair et al., 1995). The results obtained after applying the CFA are shown in Table 1 and they demonstrate that there was an appropriate adjustment of the theoretical model (S-BX2 = 741.804; df = 246; p = 6 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 0.000; NFI = 0.894; NNFI = 0.909; CFI = 0.919; RMSEA = 0.076). Likewise, as evidence of the theoretical model’s convergent validity, the results show that every item of the factors taken into account are significant (p < 0.01), and the size of all the standardized factorial charges of all the items is superior to 0.60 as recommended by Bagozzi and Yi (1988). Table 1: Theoretical model’s convergent validity and internal consistency Load Robust t- Cronbach's Variable Indicator CRI Factor Value alpha Information Technologies Financial Performance Cost Reduction Use of Technology IT1 0.767*** 1.000a IT2 0.736*** 18.635 IT3 0.718*** 18.438 IT4 0.756*** 16.016 IT5 0.839*** 20.114 IT6 0.885*** 22.130 IT7 0.856*** 19.523 FP1 0.910*** 1.000a FP2 0.923*** 30.859 FP3 0.906*** 29.266 FP4 0.869*** 24.168 FP5 0.786*** 18.866 FP6 0.698*** 15.149 PC1 0.890*** 1.000a PC2 0.870*** 28.827 PC3 0.896*** 26.562 PC4 0.872*** 23.804 PC6 0.641*** 11.491 TE1 0.868*** 1.000a TE2 0.909*** 23.708 TE3 0.917*** 24.155 TE4 0.910*** 25.119 TE5 0.855*** 20.772 TE6 0.888*** 23.038 AVE 0.925 0.923 0.634 0.937 0.941 0.727 0.916 0.922 0.706 0.958 0.959 0.795 S-BX2 (df = 246) = 741.804; p < 0.000; NFI = 0.894; NNFI = 0.909; CFI = 0.919; RMSEA = 0.076 a = Parameters constrained to that value in the identification process. *** = p < 0.01 7 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 Table 1 indicate that there is an excellent internal consistency on the factors given that, on one hand, Cronbach’s alpha is superior to 0.70 as recommended by Nunnally and Bernstein (1994), and on the other hand, the IFC value is superior to 0.60 as recommended by Bagozzi and Yi (1988). Also, the Average Variance Extracted (AVE) was calculated for each pair of factors, obtaining an AVE superior to 0.50 as recommended by Fornell and Larcker (1981). Regarding discriminant validity, Table 2 displays in the lower matrix a 95% reliability interval none of the latent factors of the correlation matrix have the 1.0 value (Anderson & Gerbing, 1988), and on the upper matrix, the extracted variance among each pair of factors is superior to their corresponding variance (Fornell & Larcker, 1981). Therefore, taking into account the previous results, it can be concluded that the measurements performed on IT and competitiveness provide enough evidence to determine that there is enough convergent and discriminant reliability and validity. Table 2: Theoretical model discriminant validity measurement Variables 1. Information Technologies 2. Financial Performance 3. Cost Reduction 4. Use of Technology 1 2 3 4 0.634 0.137 0.135 0.121 0.274 - 0.466 0.727 0.228 0.194 0.272 - 0.464 0.369 - 0.589 0.706 0.108 0.228 - 0.468 0.317 - 0.565 0.208 - 0.448 0.795 The diagonal represents the average variance extracted (AVE), whereas above the diagonal part of the variance is displayed (squared correlation). Below the diagonal the estimate of factors in presented with a 95% confidence interval. 4. Results and Discussion In order to contrast this study’s hypothesis and confirm the theoretical model’s structure, a structural equations model was used, using IT and the factors that measure competitiveness. Like that, the nomological model validity was analysed using the Chi-squared test, which consisted of comparing the theoretical model to the measuring model. The obtained results show that the model’s non-significant differences are a good explanation for the observed relationships between 8 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 the latent constructs (Anderson & Gerbing, 1988; Hatcher, 1994). The Table 3 indicates this information. Hypothesis Table 3: Results of the model’s hypothesis test Standarized Structural Relationship Coeficient Robust t-Value H1: Higher adoption of IT, higher level of Information T. → Competitiveness 0.787*** 10.485 competitiveness. S-BX2 (df = 241) = 664.838; p < 0.000; NFI = 0.896; NNFI = 0.921; CFI = 0.931; RMSEA = 0.071 *** = P < 0.01 Regarding the first hypothesis, the results displayed in Table 3 (β = 0.831, p < 0.01) indicate that IT has a positive significant effect on SMEs’ competitiveness. However, it may be concluded that there is a very close relationship between IT and SMEs’ competitiveness located in Aguascalientes, Mexico. 5. Conclusions and Recommendations This study suggests that those SMEs that have adopted IT have a broad potential for economic growth and development, given that implementing IT increases SMEs’ competitiveness, which means higher firm growth and development. Hence, in order for SMEs to improve their competitiveness skills, they must take into account, as an firm strategy, adopting IT and using it efficiently so that they are not under-used, but used at their maximum capacity to improve all areas of the organization. On the other hand, not only must SMEs adopt IT, but all barriers and obstacles that prevent SMEs from adopting them must be eliminated; this means that all managers and businessmen must be prepared to include IT in the company’s management and decision making, look for the firm to participate in public or private programmes that finance IT adoption, seek legal advice in order to eliminate all legal barriers regarding software use, train the staff so that they will use IT properly, and acquire internet access in order to improve customer service and efficiency, and generate their own data bases. In this sense, those SMEs that perform all the changes necessary for IT adoption will have greater chances of improving their competitiveness than those that do not. Therefore, it is confirmed that IT represent a key element which must be incorporated into all firms strategies, especially SMEs since IT represent a unique opportunity to improve all competitive advantages, 9 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 market position, customer service and increase market participation, competitiveness, and like that strengthen their innovation capacity. Likewise, SMEs need to acquire and improve their abilities on IT use; since this is necessary to improve all organizational processes; they are also a support in improving competitiveness and expanding into new markets. There are very few SMEs those posses the necessary skills for IT use, which is why the companies that do have them will have more competitive advantages compared to other SMEs, such as organizational growth and improved competitiveness. Under this context, SMEs must have access to the Internet, since according to Piscitello and Sgobbi (2004), this is one of the greatest barriers to be eliminated, and if this is done, SMEs will have a very powerful tool that will facilitate their product’s displacement to a bigger number of consumers. Also, internet access will allow SMEs to expand into new rapidly changing markets and personalise their products, since nowadays consumers are looking for more personalised products and SMEs have the quality to make quick changes on their production process in order to adapt their products to consumers’ needs and preferences. In this sense, this paper’s results are of great importance for researchers, academics, government authorities, business associations, consultants, etc. First of all, they are important to researchers and academics because they contribute empirical evidence of the existing relationship between IT and SMEs’ competitiveness rates in a developing country; plus, it opens up a theoretical debate about the existing relationship between these two constructs. Second, they are relevant to our country’s government authorities since the results provide efficacious and timely information about IT current situation within SMEs, with which authorities will have enough information in order to design policies and programmes that will tend to adopt and improve IT usage among SMEs, not only at Aguascalientes, but throughout the entire country. Third, these results are relevant to business associations given that, on one hand, with this information, sectorial strategies may be focused on IT adoption in order to significantly improve SMEs’ competitiveness rates and, on the other hand, to design training programmes for both managers and administrative personnel, so that the maximum benefit from the acquired technology can be obtained. Fourth, it is important for consultants because a general outlook of SMEs’ current situation regarding IT and competitiveness at Aguascalientes is presented, with which consultants will be able to design attention programmes regarding the efficient use of IT. These data present transcendental importance for business studies scholars since this study presents information about the situation Aguascalientes SMEs are currently going through regarding IT usage. Hence, with this information, researches can deepen into the existing relationship between IT and competitiveness and even into the discussion about the obtained 10 www.globalbizresearch.org Proceedings of the International Symposium on Emerging Trends in Social Science Research (IS15Chennai Symposium) ISBN: 978-1-941505-23-6 Chennai-India, 3-5 April 2015 Paper ID: CF523 results when measuring competitiveness rates through financial performance, costs reduction, and technology use, with which it will be able to analyse in more detail the advantages and disadvantages that represent the implementation and usage of IT within Aguascalientes’s SMEs. Finally, this paper has a series of limitations. One of them is the size of the sample, since only SMEs with 5 to 250 workers were taken into account, which will diminish for future studies as long as all SMEs (1 to 250 workers) are taken into account. Another limitation was obtaining the information, since only part of it was extracted regarding IT usage and management and competitiveness. Also, it is important to point out that most of the sampled SMEs regard the required information as confidential, which is why the collected data do not necessarily reflect SMEs’ reality. Additionally, only managers or owners were surveyed because we assumed that they have certain knowledge regarding IT variables and competitiveness. It would be interesting to replicate this study with suppliers, clients, and consumers in order to find out their opinion on this matter. Also, for future studies, it would be important to go even further from this paper’s results and discuss issues such as what kind of IT is the most related to SMEs’ competitiveness? What size is the company that has adopted and applied IT the most? Are there any significant differences according to the company’s size and the relationship between IT and competitiveness rate in SMEs? 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